If you’re making a financial resolution for the new year to tackle debt through consolidation, your occupation could affect the terms of a personal loan. Frequent late payments made by people with your same job title could be a factor that determines interest rate, among other aspects.
Professions that make late payments more often include real estate agents, bus drivers and nurses, according to a NerdWallet analysis of online personal loan application data. Military officers, scientists and computer programmers are the occupations with the cleanest record of no late payments, the data show.
Why delinquency rates matter
A late payment on a loan or credit account is more than a nuisance: Delinquency rates may be considered in an application for loans, including personal loans at online lending platforms. Personal loans are often used for debt consolidation or refinancing. A delinquency usually means that a borrower is a specific number of days — 30, 60 or 90 — late on a payment. This includes loan, credit card or other payments throughout a borrower’s credit history.
Although occupation doesn’t carry as much weight in lending decisions as credit history, income and debt, a lender could see a borrower’s job as an indication of the risk of default. Lenders also may use job titles to ensure your reported income aligns with the salaries of those in positions similar to yours.
A history of delinquent payments may affect a new loan’s terms, such as the interest rate. However, time matters, too: Borrowers who are 90 days delinquent on a payment are less likely to receive favorable loan terms than those who are 30 days delinquent.
A borrower’s delinquency rate is the percentage of his or her accounts, past and present, that have gone overdue for payment. Our analysis looked at the repayment habits of borrowers who use the same job title.
Jobs and delinquency rates
We examined 30-day and 90-day delinquency rates for 60 professions identified by loan applicants. When analyzing the public data, from the online personal loan marketplace Prosper, we focused on 30 days because it’s the first reported late payment, and 90 days because that’s when a debt typically is sent to a collection agency.
The July 2009 to June 2016 data for just over 500,000 loans from Prosper was made available by NSR Invest, a third-party service that provides online lending analytics tools for investors.
We found that real estate agents, bus drivers and licensed practical nurses are the top occupations for 90-day delinquencies. Doctors, attorneys and professors are among the jobs with the highest rates of no 90-day delinquencies.
The data also showed disparities within professions. Biologists, for example, are slightly more likely to have zero delinquencies than chemists. And chemical engineers are slightly more likely to make on-time debt payments than mechanical or electrical engineers. Bus drivers are more likely to have 90-day delinquencies than truck drivers.
Scroll through the table of 60 job titles below to see how your occupation stacks up against other professions.
|Occupation||% with no 30-day delinquences||% with one or more 30-day delinquencies||% with no 90-day delinquences||% with one or more 90-day delinquencies|
|Engineer — chemical||55.91%||44.09%||78.29%||21.71%|
|Engineer — electrical||51.82%||48.18%||73.90%||26.10%|
|Engineer — mechanical||49.08%||50.92%||72.22%||27.78%|
|Food service management||49.39%||50.61%||71.63%||28.37%|
|Police officer/correction officer||44.11%||55.89%||66.99%||33.01%|
|Sales — commission||44.13%||55.87%||67.11%||32.89%|
|Sales — retail||50.25%||49.75%||69.54%||30.46%|
|Tradesman — carpenter||50.42%||49.58%||69.44%||30.56%|
|Tradesman — electrician||46.35%||53.65%||69.32%||30.68%|
|Tradesman — mechanic||46.86%||53.14%||68.01%||31.99%|
|Tradesman — plumber||45.72%||54.28%||69.62%||30.38%|
|Waiter or waitress||59.08%||40.92%||75.43%||24.57%|
Loans with online lenders
Online lenders connect borrowers with investors who supply funds to originate loans. An online lending platform acts as the middleman between the two parties by collecting loan payments from borrowers and sending principal and interest payments to investors.
The online personal loans industry is dominated by large companies including Funding Circle, Lending Club and Prosper. In April 2016, the three lenders launched the Marketplace Lending Association. According to the association, the main benefit of a lending marketplace — one that matches borrowers with lenders — is lower rates for borrowers. However, qualifying for an online loan can be a challenge, since these and other lenders — such as Earnest, LightStream and SoFi — cater to borrowers who have good credit scores and high income.
What to do before taking out a personal loan
- Assess your budget to determine how much you can afford to pay back to avoid overborrowing.
- Keep an eye on your credit report and credit score. You can get a copy of your credit report once a year at each of the three credit bureaus: Equifax, Experian and TransUnion. Look for any negative items on your report and file a dispute if there are any inaccuracies.
- Shop around among several online marketplaces as well as traditional banks and credit unions. Compare possible terms and rates. Note that most online lenders do a soft credit check, which won’t hurt your credit score, but many financial institutions will perform a hard check, which will ding your score.
- Check out any lender at the Better Business Bureau and Federal Trade Commission before signing up for a loan.
- Find lenders that offer fixed interest rates, rather than variable ones. Fixed rates may be slightly higher right now, but variable rates carry the risk of ending up higher in the long run. Look beyond the monthly payment to the interest cost over time.
- Read the fine print and look for any fees for origination or annual maintenance, as well as penalties for late payments or prepayment.
- Avoid delinquency by setting up on-time payments with autopay or reminders. If you’re struggling to make payments, notify your lender as soon as possible.
Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @AnnaHelhoski. Victoria Simons is a data associate at NerdWallet. Email: [email protected].